The Impact of US Interest Rate Hikes on Borrowers and Depositors in Palestine

Part Two

- We next review some indicators contained in the Palestine Monetary Authority statistics as of 4-2023, compared with 2022.

- Interest rates payable and receivable

· If we examined Table No. 28, which shows interest rates on deposits and loans in the fourth quarter of each year, it becomes clear that:

· The interest rate on loans in Jordanian dinars in the fourth quarter of 2022 amounted to 6.19% 1.86%, a decrease from its counterpart in the fourth quarter of 2021, which amounted on dinar loans to 6.52%.

● As for interest on deposits in Jordanian dinars for the fourth quarter of 2022, it was 1.86 %, an increase over its counterpart in the fourth quarter of 2021, which amounted to 1.64%.

● As for fourth-quarter interest on loans in US dollars for 2022, it amounted to 6.16%, an increase from its counterpart in the fourth quarter of 2021, which amounted to 5.30%, which shows that lending in 2022 was clearly affected by the increase in the US interest rate on loans in US dollars.

● Meanwhile, interest on deposits in US dollars in the fourth quarter of 2022 was 2.03%, an increase from its counterpart in the fourth quarter of 2021, which amounted to 1.57%.

● As for interest on loans in shekel (ILS) in the fourth quarter of 2022, it amounted to 7.17%, an increase from its counterpart in the fourth quarter of 2021, which amounted to 6.38%, and this shows that borrowing in shekel (ILS) was affected by the repercussions of the US interest rate hikes starting from the beginning of the first quarter of 2022.

● As for interest in the fourth quarter on shekel (ILS) deposits, it rose in 2022 to 2.05%, whereas in the same period of 2021 it was 1.32%.

● This shows that even the interest on deposits in shekels increased in 2022 over 2021 (fourth quarter).

● It is evident that even investment in deposits was affected by the repercussions of raising the interest rate on deposits, which became apparent in 2022, the year in which the U.S. Federal Reserve began, in the first quarter of 2022, to raise interest rates..!

· Value of loans in the three main currencies up to 4-2023

- Loans in the main currencies in Palestine in light of the US interest rate increase

· The value of loans in Jordanian dinars decreased in 2022 (the year the US interest rate hikes began) compared with dinar loans in 2021 by $124 million; whereas the value of dinar loans in 4-2023 decreased from 2022 by $34 million.

· The value of loans in shekel (ILS) in 2022 decreased from 2021 by $206 million.

· The value of loans in US dollars increased in 2022 from 2021 by $506 million, while these loans increased in 4-2023 by $113 million over 2022....

· As for the Palestine Monetary Authority statistics on the sectors receiving loans, they were as follows:

- The value of loans granted to the private vehicles sector in 4-2023, amounting to $360 million, decreased by $10 million from 2022.

- The value of loans granted to the consumer loans sector in 4-2023 decreased by $221 million from 2022.

- As for credit card loans in 4-2023, with a value of $73 million, the value of these loans remained the same as in 2022... which means no growth and, indeed, a stop in granting loans in the area of credit cards. My assessment is that this is in response to the issuers of these cards raising their interest rates following decisions by the US Federal Reserve to raise the lending interest rate.. which means increasing the cost of credit card loans..!

- The value of facilities in the West Bank in 4-2023 amounted to $8,134 million, an increase of $293 million from its value in 2022.. The facilities in shekel (ILS) in 4-2023 were $3,258 million, an increase from shekel (ILS) facilities in 2022 by $166 million..

- The value of facilities in Jordanian dinars in 4-2023 amounted to $832 million, a decrease from facilities in 2022 by $14 million.

- As for facilities in US dollars in 4-2023, they amounted to $3,871 million, an increase from facilities in 2022 by $134 million, and facilities in US dollars in 4-2023 appear in first place... followed, as we noted above, by facilities in shekel (ILS) in second place..!

● In contrast, there is another category of Palestinians, namely depositors, for whom the interest rate hike worked in their favor, as the interest on deposits is adjusted upward to encourage people to invest in deposits, with the aim of reducing the amounts of cash liquidity in the markets.. Depositors flock to banks to invest in deposits, especially since investment and doing business by borrowing from banks has become costly as a result of the U.S. Federal Reserve raising the interest rate..!

● The value of deposits in Palestine in 4-2023 reached 16,971 million dollars (sixteen billion nine hundred and seventy-one million dollars), of which demand deposits amounted to 6,645 million dollars, while savings deposits were 5,755 million dollars, and time deposits amounted to 4,570 million dollars..

● Interest-bearing deposits in 4-2023 amounted to 8,185 million dollars, while non-interest-bearing deposits amounted to 8,785 million dollars..

● The increase in the value of deposits in 4-2023 over their counterpart in 2022 amounted to 503 million dollars.. This suggests that clients and investors took advantage of the increase in interest on deposits, which we present below (noting that the value of interest-bearing deposits increased in 4-2023 by 86 million dollars over 2022, while non-interest-bearing deposits in 4-2023 increased by 400 million dollars over 2022, and the increase was directed to demand accounts, as indicated by statistics of the Palestine Monetary Authority (PMA)).